The importance of accounting
The importance of accounting within business comes from its ability to keep track of an organisation’s financial health and reliability. Without an accountant, business owners would not be able to analyse their financial health or know whether their business is profitable.
What is accounting?
Accounting is the process of consolidating financial information to make it clear and understandable for those involved in owning a company, such as stakeholders and shareholders. The main goal of accounting is to record and report a company’s financial performance and cash flows.
Tasks carried out by an accountant include:
- Tracking income and expenditure
- Ensuring statutory compliance
- Provide quantitative financial information
- Assess the performance of a business or organisation
- Provide data to support decision making.
Types of accounting
Depending on the use, accounting within a company can either be used for internal or public purposes. Internal usage includes reporting to regulatory agencies such as the government, whereas public usage refers to everyone who is involved in the business such as investors and owners. The main types of accounting include:
Managerial
Managerial accounting deals with the operation of a company. It collects data related to how the company is run and delivers it to the manager, helping with decision making regarding development. Its duties include cost analysis, budgeting, forecasting and financial analysis.
Financial
This is one of the most crucial types of accounting as it guides businesses to make informed financial decisions. It allows businesses to comply with legal rules and regulations and reports their financial health and performance. Financial accounting is used to create income statements, balance sheets and cash flow statements.
Tax
Tax accounting determines the amount of tax-based payments a company needs to make such as income tax and pensions. This type of accounting ensures that companies are following the rules and regulations set by the government.
Cost
Companies use this type of accounting to manage how much they are spending. Cost accounting reports the variable and fixed costs to determine how to manage a company’s costs for better financial development.
Top 5 reasons why accounting is important
Keeping a record: detection and prevention of fraud
One of the biggest advantages of accounting is how it allows businesses to keep a systematic record of their financial information. Having up to date and accurate records is crucial to running a successful business. Without this information, owners would not know whether they are making a profit.
Keeping accurate records of a business’s finance is also used to detect and prevent fraud. This is done through internal control, which comes from a proper record of all business transactions. To do this a business must have an efficient and effective accounting system.
Budget planning
Budgeting is a key factor for any business. Planning a budget allows businesses to develop strategies, observe expenses and work towards making a profit. The ability to plan a budget comes from the keeping of previous records. This is made possible through the collection and maintenance of financial data by an accountant. With this information, business owners can form the basis for their planning and budget making.
Assisting decision making
Accounting plays a large role in the decision making of a business. The people involved with planning, organising and running an organisation, use an accountant’s findings to carry out their roles. Without these numbers, they would not be able to make the important financial decisions that lead to a successful business.
Decisions can range from deciding whether to expand their business; geographical or employment or making changes to how their business runs in order to see a positive change in efficiency. Without accurate accounting, business owners would not have factual data to assist their decision-making process.
Statutory compliance
Following laws and regulations is important for business owners and having a good accounting system ensures they can. Statutory compliance refers to the laws set out and enforced by the government that businesses and organisations must adhere to. To ensure these regulations are being followed, an accountant will address liabilities such as sales tax, pension funds, income tax, VAT and more.
Failure to record and pay these liabilities in a timely fashion can lead to fines and possible imprisonment.
Evaluate the performance of a business
Financial records help business owners understand what is going on with their business financially and whether it is performing well. Up to date records allow business owners to keep track of expenses, find signs of potential financial loss and compare current data with previous accounting records.
Why study accounting?
One of the biggest benefits of studying accounting is the large number of job opportunities available. All businesses and organisations need an accounting system to ensure they are organising and managing their finances well. This cannot be done effectively without an accountant.
As well as job prospects, there is also a high earning potential for graduates with an accounting degree. Depending on the career path you choose, you can expect to start on a yearly salary of around £22,000 (Indeed 2023). This can increase to £75,000+ over time as you gain more experience.
Study accounting at Cardiff University
The best place to start your UK education journey as an international student is Cardiff University International Study Centre. Here you will find expertly designed pathway programmes to develop academic knowledge and English language skills in preparation for a degree at Cardiff University.
International Foundation Year
The International Foundation Year in Business, Economics, Accounting and Finance is specifically designed to prepare international students to study for an undergraduate accounting degree at Cardiff University. A combination of university style teaching, research and academic skills development and English language courses give you the best possible start to learning in the UK.
Accelerated International Foundation Year
The Accelerated International Foundation Year in Business, Economics, Accounting and Finance is perfect for ambitious students who have strong academic and English language skills but may need extra support before beginning an undergraduate degree at Cardiff. The programme is 22 weeks and will give you all the high-quality academic and English language teaching you need for successful study in the UK.
Once you have successfully completed the programme, with qualifying grades, you can progress to the first year of an accounting degree at Cardiff.
International Year One
The International Year One in Accounting and Finance is for students who meet the higher entry requirement but would still benefit from additional English language tuition. During the programme, you will have access to world-class university style teaching and excellent facilities at the International Study Centre.
The successful completion of the International Year One pathway programme will allow you to join the second year of an undergraduate degree at Cardiff University, allowing you to complete your degree in the typical three years.
Fees
The fees for your programme will depend on the level of study you require. Find out more about fees at Cardiff University International Study Centre.
FAQs
How hard is accounting?
As with all university degrees, accounting comes with its challenges. There are complex mathematic skills and theories you will need to learn, but excellent career prospects and the ability to have an impact in the world of business make these challenges worth it.
What is the best degree for accounting?
The best degree for you depends on your level of study and the area of accounting you would like to specialise in. For an undergraduate degree, choose from the International Foundation Year in Business, Economics, Accounting and Finance or International Year One in Accounting and Finance to get the best possible start to your education in Wales.
Where can I study accounting?
The Cardiff University International Study Centre offers a range of pathway programmes that will prepare you for an undergraduate degree in accounting at the University. Cardiff University is an AACSB accredited business school, making it an excellent place to study.